sMeaning:

Insurance policies are legally binding contracts between an insurance company and
a policyholder that establishes the details of coverage, specifying the conditions or
perils and compensation provided should they occur.  A fire insurance policy is a
specific type of property insurance which covers the insured in the event their
home is lost or damaged during a fire. It is a common investment and is often
required and included as part of a homeowner’s insurance policy when a mortgage
is approved.

The indemnity is subject to change depending upon the policy. One should confirm
with the insurer about the types of risks covered, since one cannot insure the
property against all types of risks of fire.

Fire Insurance Definition

Fire insurance means insurance against any loss caused by fire. Section 2(61) of
the Insurance Act defines fire insurance as follows:
Fire insurance business means the business of effecting, otherwise than
incidentally to some other class of business, contracts of insurance against loss by
or incidental to fire or other occurrence customarily included among the risks
insured against in fire insurance policies.´

Characteristics of Fire Insurance

1.Fire insurance is a contract of indemnity. The insurer is liable only to the extent
of the actual loss suffered. If there is no loss there is no liability even if there is a
fire.
2. Fire insurance is a contract of good faith. The policy-holder and the insurer must
disclose all the material facts known to them.
3. Fire insurance policy is usually made for one year only. The policy can be
renewed according to the terms of the policy.
4. The contract of insurance is embodied in a policy called the fire policy. Such
policies usually cover specific properties for a specified period.

5. Insurable Interest: A fire policy is valid only if the policy-holder has an insurable
interest in the property covered. Such interest must exist at the time when the loss
occurs. In English cases it has been held that the following persons have insurable
interest for the purposes of fire insurance- owner; tenants, bailees, including
carriers; mortgages and charge-holders.
6. In case of several policies for the same property, each insurer is entitled to
contribution from the others. After a loss occurs and payment is made, the insurer
is subrogated to the rights and interests of the policy-holder. An insurer can
reinsure a part of the risk.

7. Fire policies cover losses caused proximately by fire. The term loss by fire is
interpreted liberally. Example: A women hid her jewellery under the coal in her
fireplace. Later on she forgot about the jewellery and lit the fire. The jewellery was
damaged. Held, she could recover under the fire policy.

8. n othing can be recovered under a fire policy if the fire is caused by a

deliberate act of policy- holder. In such cases the policy-holder is liable to criminal
prosecution.
9. Payment of Claims: Fire policies generally contain a clause providing that upon
the occurrence of fire the insurer shall be immediately notified so that the insurer
can take steps to salvage the remainder of the property and can also determine the
extent of the loss. Insurance companies keep experts on their staff of value the loss.
If in a policy there is an international over valuation of the property by the policy-
holder, the policy may be avoided on the ground of fraud.

10. The cost of fire insurance varies widely. The use of fire alarms, sprinkler
systems, and other safety measures can decrease the cost of the policy, and may
even be required for some policies. Living in a region prone to wildfires will
increase the cost of the insurance, as the risk of a payout is greatly increased.
Because many people purchase fire insurance for their homes and businesses,
insurance companies have a large risk pool, making fire insurance less expensive
than specialized insurance like earthquake or flood insurance.

11. When purchasing fire insurance, people should be aware that some types of
fires may not be covered. For example, a fire caused by an earthquake might be
excluded from a fire insurance policy, as might a fire caused by an act of God. It is
important to read the terms of the policy carefully, and to ask for clarification from
the insurance representative if the terms are not clear. If a policy does not appear to
meet the need, it should be renegotiated until it is satisfactory.
What is the extent of coverage under a Fire Insurance Policy?

Fire insurance provides protection for the estimated value of the physical house.
However, there are a number of exclusions to the same, for example medical bills,
loss of human life and pets, loss of personal belongings, structures outside the
property (including garages and gazebos), damage to the landscape and expenses
for accommodation for the time being. These things can be covered under a
package of extended property insurance.

What are the main types of Fire Insurance policies?

 Specific Policy: The insurer is liable to pay a set amount lesser than the
property’s real value. In this policy, the property’s actual value is not
considered to determine the indemnity. The average clause, which requires
the insured to bear the loss to some extent, does not play a role in this policy.
In case the insurer inserts the clause, the policy will be known as an average
policy.
 Comprehensive policy: This all-in-one policy indemnifies for loss arising
out of fire, burglary, theft and third party risks. The policyholder may also
get paid for the loss of profits incurred due to fire till the time the business
remains shut.
 Valued policy: This policy is a departure from the standard contract of
indemnity. The amount of indemnity is fixed and the actual loss is not taken
into consideration.
 Floating policy: This policy is subject to the ‘average clause’. The extent of
coverage expands to different properties belonging to the policyholder under
the same contract and one premium. The policy may also provide protection
to goods kept at two different stores.
 Replacement or Re-instatement policy: This policy is subject to the re-
instatement clause, which requires the insurance company to pay for
replacing the damaged property. So, instead of giving out cash, the insurer
can re-instate the property as an alternative option.

Why does one need Fire Insurance?

Fire insurance is important because a disaster can occur at any time. There could
be many factors behind a fire, for example arson, natural elements, faulty wiring,
etc. Some facts that stress the importance of fire insurance include:
Fire Insurance is governed by All India Fire Tariff effective from 31.3.2001 issued
by Tariff Advisory Committee, a Statutory Body. It is a commercial policy
covering building, offices, machinery, contents and personal belongings of the
office. It mitigates the risk of loss of customers arising from fire breakout. The
insured should take all possible steps to minimize the loss.

Calculation of Fire Insurance Amount/Premium:

The market value of the property is considered while insuring the sum. The amount
of premium depends on a number of factors and individual policies of different
insurers.

Fire Insurance Claim Procedure:

 Individuals/corporates must inform insurer as early as possible , in no case

later than 24 hours.
 Provide relevant information to the surveyor/claim representative appointed
by the insurer.
 The surveyor then analyzes the extent/ value of loss or damage.
 The claim process takes anywhere between one to three weeks.

Documents Required for Fire Insurance Claim:

 True copy of the policy along with schedule.

 Report of fire brigade.
 Claim Form
 Photographs
 Past claims experience

Fire Liability Insurance

 For example, if the equipment caused some sort of overload on the facility’s
electrical system, triggering some sort of small fire, the insurance policy
would cover the costs of repairing the damage done by that small fire. DJ
public liability insurance may also come in handy in the event that anyone
is injured as the result of falling equipment or some other activity directly
related to the DJ during the course of the event.
 This means that if a stairwell installed by a builder should collapse, resulting
in injury to one or more individuals, the self-employed public liability
insurance would provide the resources necessary to cover the costs of
 treatment for those injured parties, and possibly some additional
compensation during their convalescence.

Insurable objects in fire insurance:

 Building
 Electrical installation in buildings
 Machinery, plant and equipment
 Goods (raw materials, stock in process, semi finished, finished, etc)
 Godowns, goods in open
 Contents in dwellings
 Shops, hotels,etc.
 Furniture, fixture and fittings, pipelines located inside or outside the
compound etc.

Procedure of effecting fire insurance:

 Selection of insurer
 Presentation of proposal in the prescribed form
 Evidence of goodwill
 Recommendation by agent
 Survey of the subject matter
 Report by surveyors
 Acceptance of proposal
 Depositing of premium money
 Issue of cover note
 Issue of insurance policy